A car dealership is a business that sells new or used cars. Dealers have contracts with car makers to sell their vehicles. Many dealerships also sell spare parts and provide car repair services.
History
The first car dealership in the United States opened in 1889 by Fred Koller in Reading, Pennsylvania. Early cars were also sold directly by manufacturers or through stores and catalogs, such as Sears.[1]
Car dealerships today
Most car dealerships sell cars through a franchise model, where independent businesses sell cars for manufacturers. In the United States, state laws require that new cars are sold only through these licensed dealers. Tesla is an exception; it sells cars directly to customers where allowed.[2]
Dealerships are usually located outside city centers and have space for showrooms, repair shops, and car storage. Profits often come more from car services and used car sales than from selling new cars.[3]
Regulations
In the U.S., dealerships have strong legal protections. For example:
Manufacturers cannot sell cars directly to customers.
Opening new dealerships near existing ones is limited.
Dealers must be compensated for warranty work based on state rules.[4]
Some economists argue these rules increase car prices for buyers while benefiting dealerships.[5]
Future trends
Car makers like Audi and Mercedes-Benz are using digital showrooms and modern designs to attract customers. These stores let buyers explore cars on screens and place orders online.[6]
↑"Markets: State Franchise Laws, Dealer Terminations, and the Auto Crisis". Journal of Economic Perspectives. 24 (3): 233–250. doi:10.1257/jep.24.3.233.
